Persistent cognitive dysfunction is a key predictor of chronic disability and poor long-term outcome in schizophrenia. Mismatch negativity (MMN) is a short-latency cognitive event-related potential (ERP) that provides an objective index of cognitive dysfunction in schizophrenia, and reflects functioning of the auditory sensory memory (ASM) system. The present application is a continuation of R29 MH49334, Early cortical processing in schizophrenia which provided initial demonstrations of impaired MMN generation in schizophrenia, along with impaired performance in ASM functioning. Deficits in ASM performance were extremely robust (effect size = 1.25 std. dev.) and consistent across inpatient samples. Further, the deficits could not be accounted for by impairments in attention or motivation, and, instead, appeared to reflect a limitation in the precision with which simple auditory information (e.g., stimulus pitch) could be maintained or utilized within the ASM system. The present study will investigate MMN generation and ASM performance in an expanded cohort of acute and chronic schizophrenic patients and will evaluate the extent to which deficits in MMN generation and ASM performance reflect dysfunction within auditory vs. executive brain regions. This project will also evaluate the degree to which deficits similar to those that underlie impaired MMN generation may contribute to impairments in higher order brain processing. Studies to date have been confined to patients with relatively prolonged chronicity of illness. This study will also assess MMN/ASM functioning in first-episode schizophrenic subjects and will assess the longitudinal course of cognitive dysfunction and the relation of MMN/ASM dysfunction to clinical outcome during the initial years following symptom onset. It is hypothesized that MMN dysfunction, along with other cognitive dysfunction, will serve as a marker for poor outcome and an objective index for investigating underlying intracortical mechanisms.